Addressing GOP lies about the IRA

August 18, 2022

          Because the Inflation Reduction Act benefits hundreds of millions of Americans, the GOP has resorted to lying about alleged tax increases for middle-class taxpayers under the IRA. That claim is misleading and false. But it takes a moment to deconstruct the GOP lies, which are being spread by right-wing media with abandon. A reader described a case in point in the Comments section of yesterday’s newsletter. The reader said she was tweeting about the benefits of the IRA when she received responses from Republicans claiming that the IRA would impose $20 billion in new taxes on middle-class taxpayers. The Republicans cited an article in The New York Post titled, Inflation Reduction Act will cost middle class $20B: CBO.

          The claim sounds impressive and seems well-sourced because it refers to a Congressional Budget Office (CBO) report. But a careful review of the article (and the sources it cites) demonstrates that the Post engaged in a cleverly worded sleight-of-hand that results in a misleading headline and analysis. Let me first explain the trickery employed by the Post and then cite the language in the article that lays bare the misleading analysis. Other media outlets and politicians are using similar tactics. I hope my analysis below will provide a roadmap for refuting similar claims.

          Everyone agrees that the IRA increases taxes on corporations that post revenue of more than $1 billion by imposing a 15% minimum tax. Most media sources (like the Post) ignore the corporate tax increase because they know it is popular with American voters. Nor does the Post criticize tax increases on Americans earning more than $400,000 annually. Instead, the Post claims that the IRA will “cost” middle-class taxpayers $20 billion—the implication being that the IRA has imposed “new” taxes on the middle class. Not true.

          Here is the trick employed by the Post: It argues that because there will be 80,000 new IRS agents conducting audits, middle-class taxpayers will see more audits (as will taxpayers at every level of income). As a result of those future audits, the CBO assumes that the IRS will discover “under-reported income” in an amount that will increase taxes by $20 billion over ten years for middle-income taxpayers. The key phrase is “under-reported income”—which refers to income that taxpayers should have reported but failed to include on their tax returns.

          In other words, there is no “tax increase” on middle-income earners under the IRA; the CBO assumes that such taxpayers will pay taxes they already owe but failed to pay in the past. Only the Republican Party would view paying taxes legitimately owed as a “tax increase”—presumably because they believe that it is acceptable to cheat on taxes as long as you are not caught.

          Here is the critical argument from the Post article:

The CBO analysis confirms an earlier report from the Joint Committee on Taxation that found that throwing an extra $80 billion at the IRS to improve the agency’s collection of under-reported income will end up targeting small business owners to pay for the legislation.

          The Post does not link to or cite language in any CBO report to support its statement above—because the CBO reports issued to date say nothing of the sort. (Here is a link to CBO reports issued through August 15; there are two relevant reports, neither of which support the Post’s characterization of an increased burden on middle-income taxpayers.)

          To support its claim that the IRS will target “medium and small businesses,” the Post relies on a statement by the executive vice president of the National Taxpayer’s Union Foundation—who claims that the IRS will “target small and medium businesses because they won’t fight back.” Implicit in that statement is the notion that the IRS will unfairly demand payment of taxes not legitimately owed by small and medium businesses “because they won’t fight back.”

          Obviously, if you assume that the IRS will engage in predatory behavior by illegally demanding payment of amounts not due, you can gin up any amount of additional “costs” to be imposed on middle-class taxpayers—which is what Republicans are doing to justify their false claims of additional “costs” on middle-income taxpayers under the IRA.

          But there is more to the story. Secretary of the Treasury Janet Yellen has directed the IRS not to use the influx of IRS agents to increase audits of taxpayers making less than $400,000 per year. See CNN, Yellen directs IRS not to use new funding to increase chances of audits of Americans making less than $400,000. (Yellen wrote, “I direct that any . . . new personnel or auditors that are hired—shall not be used to increase the share of small business or households below the $400,000 threshold that are audited relative to historical levels.”)

          All American taxpayers—individuals and corporations—should pay the amounts they legitimately owe under the US tax code, nothing more and nothing less. When there is widespread non-compliance by taxpayers who “under-report income,” that erodes confidence in the fairness of the tax system and disadvantages honest taxpayers.

          In the end, the GOP claim of “increased taxes” on the middle class relates to taxpayers who are failing to report taxable income and who, according to Republicans (but not Janet Yellen), will face a greater likelihood of being identified in an IRS audit. Even if true, that is not an increase in taxes. That is an increase in fairness to all law-abiding citizens who pay their fair share to provide for the common good and promote the health, peace, prosperity, and security of all Americans.

The polls are in flux.

          It is too early to rely on polling to predict the outcome of the 2022 midterms. But as noted in an article in Slate, many polls are showing movement in races thought to be locked down by the incumbent. A common thread in the polling relates to concerns about reproductive freedom after the ruling in Dobbs. See Slate, Roe overturned: Voters seem really mad and ready to vote for Democrats.

          Here’s my point: The predictions in the spring that Democrats were doomed because “that’s what happens in mid-terms to the party in power” relied on “conventional wisdom” in unconventional times. Nothing is determined, nothing is assured, nothing is foregone—everything is open to possibility and change. The only lesson you should take from the Slate summary is that we should all work more diligently to elect Democrats up and down the ballot in 2022.

Liz Cheney hints at 2024 challenge to Trump.

          Liz Cheney has acknowledged the obvious—that she is considering seeking the GOP nomination for president in 2024. See Ronald Brownstein in The Atlantic, Liz Cheney Already Has a 2024 Strategy. Brownstein notes that

[t]he general feeling among Republicans I spoke with this week is that the RNC would go to almost absurd lengths to avoid allowing Cheney to appear on the same debate stage as Trump.

          Brownstein notes that Cheney is likely to appeal to college-educated Republicans who resisted Trump in 2016—a demographic he cannot afford to lose in 2024. Cheney might also mount a general election challenge to Trump in 2024 in the hopes of denying him marginal GOP votes necessary to put him over the top in a close election. Whatever happens, she now has the spotlight as the anti-Trump candidate in the GOP. If past is prologue, she will make good use of the center stage.

Trump investigations.

          There were three developments in investigations implicating Donald Trump.

          First, the NYTimes reported that a federal grand jury issued a subpoena in May to the National Archives for all of the documents it provided to the January 6th Committee. See NYTimes, Jan. 6 Grand Jury Has Subpoenaed White House Documents. The report is consistent with earlier disclosures that a federal grand jury issued subpoenas in May and June of this year to witnesses interviewed by the J6 Committee. The DOJ appears to be following in the footsteps of the J6 Committee.

          Second, Rudy Giuliani testified before a Georgia grand jury in Fulton County in the investigation regarding efforts to overturn the Georgia presidential election in 2020. Giuliana testified for more than five hours after being notified that he was a target of the investigation. See CBS News, Giuliani appears before Georgia grand jury investigating Trump.

          Finally, the CFO of the Trump Organization, Allen Weisselberg, will plead guilty to tax fraud and testify against the company, but not against Donald Trump. See Bloomberg, Trump Organization May Face CFO as Trial Witness After Plea Deal. Even if Weisselberg does not testify against Trump directly, the guilty plea will complicate business dealings for the Trump Organization. Many banks and investors will not do business with a company convicted of tax fraud. Trial for the Trump Organization is set to begin October 14, 2022—just in time for the midterms!

          Oh, and then there is this interesting tidbit: Former Vice President Mike Pence suggested that he would entertain a request to testify before the January 6th Committee. While odds are against Pence testifying before the Committee, the fact that Pence is dangling that possibility complicates Trump’s defensive maneuvers. Trump should try to keep Pence on his less-bad side to avoid provoking an appearance by the former Vice-President. The walls are closing in on Trump. Let’s hope that Trump is cornered soon!

Concluding Thoughts.

          It’s too early to rely on polls to predict the outcome of the midterms, but the general trends that are beginning to develop make logical sense. Women are breaking against Trump—even in deep red states. It is objectionable to abolish a constitutional right to reproductive choice, but it is reprehensible to criminalize a liberty that was a federally protected right for fifty years. In abolishing a constitutional right for the first time in history, Justice Alito snidely noted that “Women are not without electoral or political power.”

          A statement that Alito meant as a throwaway justification for a reactionary decision may turn out to be the undoing of the Republican Party. Let’s do everything we can to turn Alito’s barb into an epitaph for the GOP.

          Talk to you tomorrow!